CORP SALE 1120S

[TAXMAN]

HELP me understand where I may be wrong. 1120s(husband and wife). TP basis in stock before 2016 120k.#'s appear to check out. corp sold out in 2016 and dissolved. I have coming through the K-1, 325k tied to goodwill, 175k 1250 gain, 632959k 1231 gain for sale of hard assets. Also have 170k coming as ordinary income in box 1 of k-1. Corp had no outstanding debt. If these things show up on TP return in properholes tp owes a pile of money. My question is what do I do with the stock basis? Gross sales price was 1.2m. Should the basis be an offset to the sale? With this all happening does the basis go up more. My thinking (on paper) in order to be sure this thing is close. It would appear that TP basis would be 120k plus 170k then sold it for the 1.2m thus creating a gain of somewhere around 910k more or less. Thanks to anyone who has time to look at this. Personal return will go on extension but TP needs to send a rather large payment by Tuesday.

[rfassett]

This is complicated by the fact that it was NOT a Corp Sale.  This was an asset sale followed by dissolution of the corporation.  So in simple terms, you will take the 2016 basis, add those items to which he will pay tax on, deduct any withdrawals and that will be the basis in the stock for dissolution purposes.  But before I go too far in trying to help you with a basis number, I need you to check the 1231 gain.  On a 1.2m sale, is it possible to have a 632m 1231 gain?  Also, what happened to the cash from the sale?  You could very well end up with a zero basis.

[TAXMAN]

from k-1 box 1=170K box 8a=325k box 8c=175k box 9=632k. If I add these to the basis then take the cash at 1.2m it would appear he has a loss position of 222K. Does this seem reasonable?

[rfassett]

With his 12/31/15 basis of $120,000 plus taxed 2016 income of $1,302,000 less cash withdrawal of $1,200,000, he has a remaining basis in the stock at time of liquidation of $222,000.

That $222,000 would be reflected on Form 8949 with zero proceeds, $222,000 basis, long term F category.  Yes, this would show as a $222,000 loss which would offset some of the capital gain coming out on the K-1 or other capital gains that the client might have.

You are on the right path, in my opinion.